Trump on Yellen and the CFPB

By rchrisman@robchrisman.com

A Japanese couple is having an argument over ways of performing highly erotic sex:

Husband: Sukitaki.

Wife replies: Kowanini!

Husband says: Toka a anji rodi roumi yakoo!

Wife on her knees literally begging: Mimi nakoundinda tinkouji!

Husband replies angrily: Na miaou kina tim kouji!.

Wife says:Watakushi Wa Anata Sukhi Deshu

I can't believe you sat and read this as if you understand Japanese!

You are unbelievable!

I always knew you would read anything as long as it is about SEX...

The BLS reports 5 of the 10 fastest growing jobs pay less than $25k per year. I wonder what percentage of real estate agents earn that? Realtors have a huge influence of a borrower's lender decision, according to a Freddie Mac survey. The biggest factors are ease of doing business, reputation, and the strength of their relationship with the agent. "Eighty-four percent of real estate professionals have a select group of lenders to which they generally refer their clients. Of these, 73 percent have 1-3 lenders in their network and 24 percent work with 4-6 lenders. More than three-quarters (76 percent) say their clients always or often use their recommended lender referrals. This figure climbs to 87 percent among those who sell more than 20 properties per year."

The second book in a series for mortgage professionals is now available and will prove useful for new people to the industry as well as seasoned veterans. "Becoming the Successful Mortgage Broker" by Jason C. Myers offers in depth information for someone getting started and proven successful sales tips for more experienced loan officers. The format of the book allows you to look at tips you can use to better your business as well as commentary on the current market and useful information for mortgage consultants. The book can be found on Amazon.

In terms of legal and compliance services for lenders, Michael Celenza with Buckley Advisors writes, "We see potential risk is hiding in plain sight. Segregation of Duties (SOD) has been around for a long time but believe it or not, it's not a regulation, it's a 'Best Practice' and is a primary question found in the Interagency Fair Lending Examination manual. Mortgage Bankers have used this for years but it's less common with Community Banks and Credit Unions in the residential mortgage space, they ask their staff to wear multiple hats, not realizing the potential risk.  An example of this is having Loan Officers process and underwrite their own originations.  The theory is to properly serve their community, loan officers and their manager must be empowered to make underwriting exceptions to accommodate the customer. Given the increased focus on anti-money laundering (AML), governance, risk and compliance (GRC) and threats of cyber-attack, ransom ware, email scams to fund terrorist organization and mortgage fraud made easier by technology. Taking preventative measures is critical and segregation of duties is a key part of those measures. Buckley Advisors can perform operational analysis, create policies and procedures, and provide guidance in this and many other areas."

In a distantly related matter, PHH Corp. will pay a $28 million fine after examiners uncovered "persistent shortcomings" in its mortgage origination and servicing practices. Under a consent order with the New York State Department of Financial Services, the company's PHH Mortgage Corp unit and its PHH Home Loans LLC affiliate will also employ an outside auditor for one year, to help identify and make refunds to borrowers who were overcharged on closing costs. PHH was accused of mishandling foreclosures, including by failing to provide relief to qualified borrowers, and letting employees sign foreclosure-related documents after "perfunctory" reviews. PHH was also accused of imposing larger-than-expected fees on unwary borrowers, and using a compensation plan that would reward employees for steering borrowers into risky or unnecessarily costly loans.

 In a statement, PHH said it settled to avoid the cost and distraction of litigation, and has made "substantial strides" in improving its servicing operations. It previously said it had set aside money for the accord in this year's third quarter. For those playing along at home, remember that PHH Home Loans is a joint venture between PHH and Realogy Holdings Corp.

 And plenty of lenders lie awake at night wondering whether cities (in this case, Miami) can sue banks under the Fair Housing Act even though the law gives standing specifically to "aggrieved persons." During arguments this week, the justices seemed to split 4-4 on the question, an outcome that would be a win for Miami and bad news for banks. And thus we have the Supreme Court of the United States (SCOTUS) revisiting 2008's housing collapse with banking test cases. At issue are two cases testing whether Miami can sue Wells Fargo and Bank of America under the Fair Housing Act for alleged racial discrimination in mortgage terms and foreclosures.

Suffolk University Law School Professor Kathleen Engel believes that expanding municipalities' authority to curtail predatory lending that can destroy neighborhoods is sensible policy. Likewise, it is critical to permit cities to recover for the blight that exploitative loans can leave in their wake. Engel published the article "Local Governments and Risky Home Loans," which addresses the issue. The abstract summarizes the problem: "Municipalities from the Central Valley in California to Upstate New York bear the legacy of reckless mortgage lending. Foreclosed homes and toxic titles have caused blight and cost communities billions of dollars. Many cities tried to halt the risky loans by calling on state and federal legislators and regulators to intervene. Some even passed ordinances aimed at curtailing the high-cost loans that were destroying their neighborhoods. Their pleas were dismissed and their ordinances overturned...."

 On the good news side of the ledger, Moody's Investors Service has affirmed the servicer quality (SQ) assessments for Ocwen Loan Servicing, LLC at SQ3- as a primary servicer of prime, subprime, second lien and special servicer of residential mortgage loans. Moody's also affirmed Ocwen's master servicer assessment of SQ3. Moody's writes, "As of 30 June 2016, Ocwen's servicing portfolio totaled approximately 1.47 million loans for an unpaid principal balance of approximately $219.5 billion. The portfolio has declined from the prior review in part to the company's decision to sell a significant portion of government sponsored enterprise (GSE) mortgage servicing rights (MSRs).

 "Additionally, the company is currently unable to acquire new mortgage servicing as part of its agreements with the New York Department of Financial Services and California Department of Business Oversight. Ongoing inquiries by the Securities and Exchange Commission and CFPB remain along with continued oversight by multiple regulatory monitors. During the review period, Ocwen improved its risk management, quality control and compliance processes by enhancing its oversight and monitoring procedures and increasing staff in these areas. The company has continued to demonstrate above average performance metrics across its operational areas including collections, loss mitigation and timelines. The SQ assessments reflect Ocwen's above average collections for subprime and second lien loans, and average collections for prime loans. The company's loss mitigation abilities, as well as foreclosure and REO timeline management, are assessed above average while the company's loan administration function is assessed as average. We view the company's servicing stability as below average, a view that incorporates the company's corporate family rating of B3 on negative outlook."

 Keeping on with positive news, in the "good news" category in capital markets news, holdings of the top 25 banks was released and provided insight into the demand for MBS. In Q3 of 2016, banks added $49 billion of Agency MBS, a significant increase from Q2. The data also confirmed bank's appetite for purchasing more U.S. Treasuries, which posted the fastest growth since 2014, and reported a net sale of Ginnie Mae securities, citing the overall rich valuations from overseas investors.

 Also, regarding the election, conventional wisdom suggested that the odds of a December interest-rate rise from the Federal Reserve would fall because the prospect of a Trump presidency represented a new source of significant uncertainty. The market-implied odds did fall, but negligibly, per data from the federal funds futures market. The Wall Street Journal reported that Trump would not be seeking Federal Reserve Chairwoman Janet Yellen's resignation. But neither would he appoint her to a second term when her current term ends in February 2018. And who knows what will happen between now and then?

 Trump said he would also boost infrastructure and defense spending, cut taxes, and deregulate - all of that will both stimulate the economy and be inflationary, thereby steepening the yield curve. And the president-elect has said he would call for a moratorium on new financial regulations and has often spoken of "dismantling" the Dodd-Frank financial reform law that created the CFPB.

 But on the bad news side of things, the 10-year Treasury yield saw its biggest jump in three years today, and yields went back to where they were in January, as investors prepared for a President Trump and a supportive Congress to sharply increase U.S. government borrowing. Wait a minute... isn't that more of a Democratic thing? Trump will not even be inaugurated until late January, much less have his plan passed by then, but his campaign proposals were radical enough that traders sold. Blame some of President-Elect Trump's proposed polices regarding tax cuts, fiscal stimulus, and infrastructure spending. In addition, the stock market staged quite a turnaround. Go figure.

 Treasuries initially rallied on the massive risk-off trade with the 10-year note hitting a low of 1.72%, versus the 1.86% close, before ripping higher hitting a high yield of 2.09% just after the sloppy 10-year auction, for an intra-day range of 37 basis points - larger than even the 30 bp range in the post-Brexit trade. Our benchmark 10-year price sank over 1.75, 5-year Treasury securities sold off .625, and agency MBS prices followed but not as badly.

 Looking at the big picture, remember this verbiage from the FOMC's meeting last week? "The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way." But what if principal payments go down? With the higher rates comes less chance of the Fed receiving money from rate & term refis and thus early payoffs to purchase more agency MBS. That's a bit of a double whammy (higher rates lead to fewer refinances, fewer refinances lead to less Fed purchases, less Fed purchases lead to higher rates), although with many areas appreciating cash-outs are picking up. And there are borrowers selling their homes and moving up.

 Tomorrow the markets are closed, as are many lenders. Does today's news make much difference? Probably not, but we had weekly jobless claims for the week ending November 5: (-6k to 254k). This morning, on the last bond trading day of the week in the U.S., we find the 10-year starting off at 2.10% with agency MBS prices worse .250.

Marijuana Election Results and Lending, and oh, The Election

 

By rchrisman@robchrisman.com

The election results can be confusing. But maybe the fellow narrating this short video could help explain things, just as he does the turbo-encabulator.

Friday is a day to honor veterans. Different people do that in different ways, and one way is for a restaurant chain to offer a free meal to those who served their country. Pass this list along to a vet, and hats off to those establishments.

"Think social media marketing is dead? Let's do the math:  The average LO has 338 Facebook friends. Just 3 auto-posts a week adds up to 52,728 potential impressions annually to people they know. And that's just Facebook! Derivian Information continues to roll out LOsocialbot 'Enterprise' for mid to larger sized retailers. Originators love the service because it posts great content for them. Compliance loves it because it provides review, release and archiving for all the LO's social outlets.  If you're looking to put a bow on your social media marketing efforts, contact Jason Lutz."

 Regarding the residential lending environment, Rick Roque, co-founder of Menlo, a banking M&A and Retail Management practice, writes, "We have a new President, and the only thing for certain is rates are expected to go up in the next 30-60 days - as many have been predicting since 2010. With this as a backdrop, lets summarize a few things. What do an improving economy, low unemployment (4.9%), 2.5-3% wage growth, and appreciated inflationary pressures over the summer (to over 1.4%) have to do with Branch Managers and Loan Officers looking for better opportunities? It means the percent of purchase business is going to increase more dramatically in 2017 and 2018, and mortgage lenders will be aggressively marketing and recruiting for new loan officers. Why is this a problem? Every wholesale & correspondent mortgage bank, along with Federal/State Chartered banks will rapidly seek to enter or expand their retail platform to pursue purchase business. This is great for competing wages for loan officers, but it also poses significant risks for loan officers today.

 "The risks are that these lenders, especially wholesale lenders, have very poor branch support processes, personnel and marketing services, and heavily restrictive branch manager agreements. The key is to identify a mature, innovative and supportive Retail Mortgage Banks that will equip you to be very competitive. The increase in purchase levels will heavily favor mortgage banks over State and Federally chartered banks whose cultures are slower to move amidst the competition. It is clear that independent mortgage banks, branch managers and loan officers from Depository Banks, Wholesale Lenders and Retail Mortgage Banks in Massachusetts, Connecticut, New Hampshire, Maine, Rhode Island and Florida investigate more serious and competitive opportunities in these markets - and there are a few highly competitive platforms - but you need to know what you are looking for, otherwise, it could be a very risky pursuit." If you are looking to investigate opportunities for your company to be purchased/ acquired OR your LO production team/branch would like to join a heavily competitive and well capitalized mortgage bank in these states, contact all Dr. Rick Roque (413.297.6895).

Congratulations to Caliber Home Loans, Inc.'s Matt Schilling who is its new Senior Vice President of Strategic Growth. Mr. Schilling will be responsible for leading Caliber's Strategic Growth, Small Mergers & Acquisitions and Talent Acquisition initiatives.

 And congrats to Bill Elliott, CMB, AMP, of Envoy Mortgage, who has received the New Mexico Mortgage Lenders Association's Mortgage Lender of the Year Lifetime Achievement Award.

 PHH not only came out with its earnings but also announced that it was exiting the private label solutions (PLS) segment in early 2018. Mortgage origination trends were strong. During the earnings call management noted it had entered into an agreement in principle with New York DFS. The company is in negotiations with FHA and MMC, and management noted that negotiations might spill into next year. PHH saw higher-than-expected loan sale volume and higher gain on sale margin. Loan sales of $3.0 billion surpassed estimates, and the gain-on-sale margin (as a percentage of closings) came in at 2.95%.

 PHH also announced a sale of $120 million of Ginnie Mae MSRs (mortgage servicing rights) at a modest gain. Pricing in the Ginnie Mae MSR market has been challenging and some holders have recently taken negative marks to reflect this. The fact the PHH could sell this at a premium suggests that their carrying values on the other MSRs are likely to be seen by the market as being reasonable.

 Now that the bi-partisan campaigning is over (based on the CNN exit poll, 9 percent of voters ages 18-29 went for third parties!) let's switch, as some would suggest, disaster news.

 Correspondent Lenders must adhere to Fifth Third's Disaster Policy located in Chapter 7, Section C of the Correspondent Seller Guide Underwriting Guide and the disaster policy overlay in the Overlay Chart. Federal disaster areas currently affected include a wide range of counties in North Carolina and Florida.

 AmeriHome posted: on 10/17/2016, FEMA issued Amendment No. 1 to DR-4283 granting four Florida counties Flagler, Putnam, St. Johns and Valusia, individual assistance to supplement recovery efforts in the areas affected by Hurricane Matthew beginning October 3, 2016, and continuing. Hurricane Matthew's effect on South Carolina, beginning October 4^th, has been Amended, No. 2 to DR-4286, granting 15 South Carolina counties individual Assistance. In addition, Amendment No. 5 to DR-4285 granted North Carolina counties Martin, Tyrell and Washington assistance and Amendment No. 6 to DR-4285 granted Craven county in North Carolina individual assistance as well.

 Per recent AmeriHome Correspondent bulletins, on 10/24/2016, FEMA issued amendments granting assistance to areas affected by Hurricane Matthew. Amendment No. 3 to DR-4283 granted inclusion for Duval county in Florida. Amendment No. 4 to DR-4284 granting three additional GA counties aid, Evans, Liberty, and Long. Amendment No. 8 to DR-4285 adding Lee, Moore, and Wake counties in North Carolina.

 In response to designated counties in South Carolina and North Carolina that were declared disaster areas, Ditech created an interactive web site that links to FEMA's site. It is the responsibility of each Correspondent Client to monitor the FEMA web site and obtain the required re-certification when there is a Major Disaster Declaration that includes Individual Assistance up to purchase by Ditech.

 In response to Hurricane Matthew in Florida and in response to a Federal Disaster Declaration, M&T Bank will enforce the Disaster Re-Inspection Policy for all properties located in the affected counties.

 Find updated FEMA DECLARED DISASTER COUNTIES document located on the FCMKC's Knowledge Center > Full Guidelines > Declared Disaster Counties. Disaster policy and procedures can be found in the product Full Guidelines.

 Because of Hurricane Matthew, occurring in Virginia from October 7 (incident start date) and continuing (incident end date TBD), the President issued a federal disaster declaration on November 2 for the following counties / independent cities: Chesapeake, Newport News, Norfolk, and Virginia Beach.NewLeaf Wholesale requires that all subject properties in the areas impacted by the disaster require evidence that the subject sustained no damage from the identified disaster.  If the subject property is in an impacted area listed above, with a completed appraisal dated prior to the incident start date, a 1004D re-inspection completed by the Appraiser must certify that the property is free from the applicable natural disaster damage.

 Hertford county in North Carolina has been added as a disaster area per FEMA as well as both Brunswick and Halifax county. Plaza has updated its list of impacted areas accordingly. For additional details on Plaza Natural Disaster Policy and inspection requirements, please click here.

 On 11/2/2016, FEMA issued DR-4285 granting individual assistance to Chesapeake, Newport News, Norfolk, and Virginia Beach in the commonwealth of Virginia to supplement recovery efforts in the areas affected by Hurricane Matthew beginning October 7, 2016, and continuing. In addition, Hertford county in North Carolina has been added as well. AmeriHome clients are reminded to review its disaster policy requirements.

 My cat Myrtle, for some reason, was intent on following the marijuana voting around the country. Due, perhaps, to the plant's relation to catnip? Regardless, California, Massachusetts, Maine and Nevada voters approved recreational legalization, joining Washington and California. Arizona voters appeared to have rejected recreational legalization, along with not re-electing Sheriff Joe Arpaio. On the medical side, Florida, Arkansas, and North Dakota all voted in favor of medical cannabis, and Montana appeared likely to also approve it.

 The results may force Congress to resolve differences between federal and state laws that have paralyzed much of the banking industry. Under Obama, federal authorities largely took a hands-off approach to state-level legalization efforts. But an incoming administration more skeptical of drug reform could easily reverse that approach. Although marijuana is legal with several states at the state level, it is not legal at the Federal level. Which of course leads to the issue that any FDIC bank, or government agency like Freddie, Fannie, or Ginnie, not being able to accept marijuana-related income on loans in their programs. But what about banking the marijuana industry. Same thing - many banks that report up to federal regulators can't accept that income, and won't handle those deposits. But banking marijuana businesses is not illegal. It's a permissible activity but banks need to be very thorough in their review of all the risks involved. The strong wins across the country will increase pressure on Congress to reconsider how the Federal Government treats this Schedule 1 illegal drug (harmful with no medical use), including access to banking.

 There are plenty of questions. What about someone who owns a rental house, and the tenant's income comes from a marijuana-related business? What about problems caused by marijuana cultivation in and around residences (water, heat, & humidity often lead to mold)? What if a housing complex in a state with legal weed has its loan with Fannie Mae, or receives subsidies from the Federal Government? Things can become complicated, and conflicting, in a hurry. The Agencies and investors' contractual agreements with lenders place the burden on the lender to assure that they are conforming to existing rules, regulations, and laws.

 Marijuana's drug classification has banks nervous about working with legal business owners and the lenders are fearing a backlash like massive fines and perceived instances of money laundering from federal regulators and law enforcement if they conducted business with legalized marijuana sellers.

 Property values in Washington and Colorado have certainly done well after legalizing marijuana - although a direct cause & effect is tenuous. In Colorado Amendment 64 gives local governments the authority to regulate commercial activities associated with the recreational use of marijuana. Most counties in Colorado have either already passed bans on recreational marijuana retailers or have delayed making a decision and placed a moratorium on pot business.

 There isn't much to talk about with the bond market, other than the environment has shifted today. Trump, on the campaign, called for the repeal of the Dodd-Frank Wall Street reform law, and he advocated for U.S. Supreme Court justices in the mold of the late Antonin Scalia. Remember that Yellen's term as Chair of the Fed doesn't expire until 2/3/18 but Trump has made critical comments of her on the campaign trail. Donald Trump's electoral victory, by roiling global financial markets, could upend Federal Reserve officials' plans for raising short-term interest rates at their meeting in mid-December.

 Yesterday U.S. Treasuries sold off (rates moved higher) as investors adjusted their bets on the future favoring a Clinton Administration. The only U.S. economic data release was job openings for December which slightly missed expectations. The $24 billion 3-year Treasury auction printed a high yield roughly in line with market expectations although the bid-to-cover and indirect bids were lower than usual. The 10-year note dropped .250 in price and got within 0.5bp of the recent high (1.88%), hitting 1.876% before bouncing modestly; agency MBS fared better.

 We've had the usual MBA Mortgage Index for the week ending 11/5 (-1.2%). But the big story is the result of the elections, and the apparent swing toward a complete Republican government. As usual the stock market is garnering the press, but the U.S. 10-year yield, as a proxy for our interest rates, hit an overnight low of 1.71% but has since bounced. Expectations for stepped up fiscal policy and a more hawkish Fed under a Trump White House is weighing on the long-end of the yield curve. Coming up is a $23 billion 10-year Treasury auction. We find the 10-year this morning up to 1.95% and agency MBS prices worse than Tuesday's close by .250-.375.

Earnings Announcements Continue and They're Pretty Good

By rchrisman@robchrisman.com

One day a florist went to a barber for a haircut. After the cut, he asked about his bill, and the barber replied, "I cannot accept money from you, I'm doing community service this week."

The florist was pleased and left the shop.

When the barber went to open his shop the next morning, there was a "thank you" card and a dozen roses waiting for him at his door.

Later, a cop comes in for a haircut, and when he tries to pay his bill, the barber again replied, "I cannot accept money from you, I'm doing community service this week."

The cop was happy and left the shop.

The next morning, when the barber went to open up, there was a "thank you" card and a dozen donuts waiting for him at his door.

Then a Congressman came in for a haircut, and when he went to pay his bill, the barber again replied, "I cannot accept money from you. I'm doing community service this week."

The Congressman was very happy and left the shop.

The next morning, when the barber went to open, there were a dozen Congressmen lined up waiting for a free haircut.

A loan officer walked up to me at a recent sales event and complained, "I'm spending more time promoting myself than I am being myself." I replied, "I didn't you know you were running for office!"

 In terms of business opportunities for builders, "Are you a homebuilder looking to earn ongoing, reliable profits? Do you want more control over your customers' purchase and refinance experience? Is regulatory red tape keeping you from offering your buyers a better mortgage solution? A well-known depository-owned lender wants to have a confidential conversation with you about forming a mutually beneficial joint venture. The company has a proven track record of delivering A+ customer experiences, while managing the risk and regulations of the mortgage business." Interested parties, principals only, should send a note of interest to me to learn more and be put in touch with the institution.

 Under the "non-QM" banner, "Greenbox Loans was founded based on the concept of 'out of the box' underwriting of residential loans. 'Many originators & brokers come across borrowers that are fine credit risks but don't fit many company's guidelines,' observed Raymond Eshaghian, President of Greenbox. Greenbox Loans is offering several programs as alternatives for private 'hard money' for investors whereby borrowers can purchase or refinance investment properties with no income, no employment, and no reserves of up to 75% LTV. These investor programs are available for borrowers with fico scores as low as 640 and can be used for purchase, rate and term refinance as well as cash-out loans. In addition, self-employed borrowers with FICO scores as low as 580 can obtain financing with NO Tax Returns by utilizing either personal or business bank statements and receive up to 80% LTV. Greenbox is hiring Underwriters, Funders, Account Managers and Wholesale Account Executives for Inside & Outside Sales. Send your resume to careers@greenboxloans.com or call directly to: 213-235-4204."

 And in terms of tools for originators, "Even if you weren't at the MBA, you know that the digital mortgage is here to stay. Modern platforms like Maxwell enable loan officers to manage their active borrowers, deliver a modern experience to customers, and connect to source data like bank accounts and online tax returns. 'Loan officers tell us we save them a day a week,' says John Paasonen, Maxwell's CEO. 'We built Maxwell for originators and their teams to work seamlessly with borrowers and agents, from application to collecting conditions all the way to cleared to close.' Maxwell has facilitated nearly a $1B in mortgages since it was launched publicly this summer. Chrisman Report readers benefit from a 25% discount on their first year. Sign up for a demo of Maxwell to see how it can transform your work."

 

Events this week and all of November? You bet!

 

Register for Plaza's complimentary webinar on November 8^th to learn more about its Fannie Mae HomeReady program.

 On Thursday, November 10^th, join Essent for a 60-minute webcast in which Mark Fleming, Chief Economist, First American Financial Corporation, will dig into economic measures used to justify the "automation angst" narrative, uncover the truth behind the data, and gauge automation's real impact on the housing market. Don't miss this opportunity, register now.

 Join CoAmp on November 10^th for an informative one-hour webinar-based panel discussion about the implications of the Colorado Division of Insurance's recent landmark decision to prohibit Market Service Agreements for title companies.

 Are you looking for unique insights on consumer credit trends? Join Experian on November 17^th for its quarterly webinar to hear highlights from the Q3 2016 Experian-Oliver Wyman Market Intelligence Report.

 Genworth Mortgage Insurance is offering another round of courses on its Tax Return Review for the Self-Employed Borrower as well as its Income series in the month of November. Both series provide goal-oriented training with minimal time investment, leading to in-depth knowledge of the topic and the ability to provide quick-closing, higher-quality loan packages. With each course lasting less than one hour, Genworth is providing lenders the flexibility to brush up on single topics or register for all available modules in each series. Register here. To learn more about Genworth's comprehensive set of self-paced eLearning courses, live webinars and classroom training offerings, visit Genworth Training.

 SunWest has a full November calendar of webinars available. Topics include Mortgage Disclosure Improvement Act (MDIA) Regulations, Appraisal Ordering Process, Best Practices for Correspondent Delivery, Warehouse Lending Process, USDA Loan Programs and FHA's 203(k) Rehabilitation Program, HUD's primary tool for the rehabilitation and repair of single family properties.

 Register today at www.siliconvalleycamp.com for the 2nd annual Casino Royale at the Glasshouse on December 8, presented by Silicon Valley CAMP and the Asian Real Estate Association of America (AREAA). Come to network, play games, and enjoy the food, drink, live music, silent auction, celebrities, magicians and Santa Claus!  Fabulous prizes include a Razor Hovertrax 2.0 Hoverboard, Sharp 50-inch Smart LED TV, and Warriors Tickets! ALL proceeds donated to Rebuilding Together, a 501(c)(3) helping repair homes and adding accessibility modifications for elderly and low-income homeowners in Silicon Valley.

 The MBA is offering a one-day workshop on December 15th in Charlotte to consider CRA residential mortgage lending requirements. Regulatory developments, practical case studies and best practices will be covered. Legal experts will cover the interrelationship between CRA, fair lending and the new HMDA, as well as the new CRA Interagency Q&As from July 2016. 

 Turning to news impacting lenders, how much do lawsuits, and the resulting fines, cost? Wells Fargo is talking to multiple regulators about investigations it mortgage lending, and has raised reserves for possible litigation losses related to its fake accounts scandal to as much as $1.7 billion, it said in a filing last week. In the filing, the bank said it has received "potential theories of liability" from the Residential Mortgage-Backed Securities Working Group of the Financial Fraud Enforcement Task Force, which is concerned about some of Wells Fargo's mortgage practices.

 On the flip side of paying fines, plenty of businesses in the residential lending sphere are making some coin. Last week Fannie Mae reported $3.2 billion in net income for the third quarter, up from $2 billion in Q3 of 2015. Losses on interest-rate derivatives totaled $491 million, down from $2.6 billion in Q3 of 2015. FNMA will pay a dividend to Treasury of $3 billion this quarter, which brings their total paid to the Treasury to $154.4 billion. FNMA drew $117.1 billion in support from the Treasury.

 Based on third quarter results Freddie Mac will pay a dividend to the U.S. Treasury of $2.3 billion in December leaving a capital reserve of $1.2 billion. The reserve is reduced every year. The December dividend will bring the total paid to the Treasury since the company was put into conservatorship in September 2008 to $101.4 billion against funds provided to Freddie Mac in a series of draws totaling $71.3 billion. Freddie has not required a draw since the end of 2012.

 Ocwen Financial finally posted a profit, earning $9.4 million for the third quarter. Operating EPS excludes a $5.7 million gain on the sale of MSRs, a $2.3 million positive MSR mark, and $17 million of regulatory reserving charges. The company also plans to make a request to the New York regulator that the company be allowed to acquire MSRs.

 But Ocwen (a mega servicer at over $216 billion) is not out of regulatory hot water quite yet. In its SEC filing, Ocwen reiterated that it has "received several civil investigative demands, or investigative subpoenas, from the CFPB [Consumer Financial Protection Bureau] seeking information about our servicing practices followed by a Notice and Opportunity to Respond and Advise (NORA) letter from the CFPB under which the CFPB (1) notified us that the CFPB's Office of Enforcement is considering recommending that the CFPB take legal action against us relating to compliance with federal laws pertaining to our servicing practices..."

 Essent done good. The private MI company posted a strong quarter driven by the positive impact of single premium cancellations and higher insurance-in-force (IIF) growth. We could see a slower decline in the average premium rate due to the 4Q impact of refi activity and positive impact of post-PMIERs single premium price adjustments. Essent is not ceding premiums to reinsurers, which helps relative to NMI Holdings (NMIH). Anyone who owns stocks knows that its shares currently trade at 2x book value, above the peer range of 1-1.1x. Essent saw a stronger-than-expected premium margin. The premium margin increased to 59.1 bp from 57.6 bp Q/Q.

 PennyMac Financial Services done good too. PFSI's earnings beat many estimates due to higher gain on sale income driven by meaningfully stronger than expected mortgage volume. This was partially offset by lower servicing income. Those who dug into the numbers saw that "Penny" removed the negative MSR mark net of hedge gains. The negative MSR mark was driven by an increase in the discount rate that the company was using on its Ginnie Mae MSRs. This reflects the reduction in liquidity for Ginnie Mae MSRs in the market as many large banks have exited the FHA origination and servicing business.

 PennyMac's servicing portfolio increased to $186.7 billion UPB from $171.7 billion UPB in 2Q. You can figure a servicing fee margin of 27.4 bps, down from 28.7 bps in 2Q. On the production side Penny estimated that its market share for correspondent production rose to 10.5%, up from 9.2%. Total origination volume increased by 30% Q/Q and conventional rate locks increased 43% q/q to $9.7B from $6.8B in 2Q. These levels are significantly above industry production estimates. (PennyMac is releasing a new SRP Grid, updates to LLPA's and Seller Guide updates.)

 Nationstar reported 3Q16 figures that also beat expectations due to stronger-than-expected results from the origination segment. But strong mortgage banking was offset by weaker servicing. NSM reported adjusted pretax origination earnings of $83 million, up +54% from $54 million in 2Q. Funded volume rose +6% to $5.5B from $5.2B last quarter, with purchase volume accounting for 24% of total funded volume (down from 26% in 2Q). Gain on sale margin (based on funded volume) increased +15% to 3.84% in 3Q vs. 3.33% in 2Q. Based on total closings, the gain-on-sale (GOS) income increased to 3.84% from 3.33%.

 In terms of servicing, during the quarter NSM boarded about $100B of loans, of which $91B were subserviced loans that carry lower margins. The prepayment speed (net of recapture) was 15% vs. 14% the prior quarter while the recapture rate dropped 27% from 25% in 2Q. Putting it a different way, NSM's operating EPS (earnings per share) excludes a negative MSR mark of $8 million. Servicing came in below some expectations driven by higher amortization and a lower servicing fee. This is material given that the quarter-end servicing portfolio was $453 billion up from $369 billion (UPB).

 Looking at rates, Friday fixed-income security prices traded higher, and thus rates went lower, despite a better-than-expected jobs report for October. Mortgages didn't do much. All eyes now turn to tomorrow's U.S. general election which the press has been talking about for years, which most pollsters now believe will be closer than they thought it would be two weeks ago. And at this point it would be a surprise if the Federal Open Market Committee did not hike short-term rates in December. If you're a fan of numbers, on Friday the 10-year improved .250 in price to end the week yielding 1.78% but the 5-year T-note and agency MBS prices only improved marginally.

 For scheduled news, there isn't anything today. Tuesday we'll have the September JOLTS (Job Openings) and a $24 billion 3-year Treasury auction. Wednesday we'll probably learn who won the BIG election and the various elections around the nation; lost in all of that will be the MBA's usual application numbers for last week and a $23 billion 10-year Treasury auction.

 The excitement will continue Thursday with Initial Jobless Claims and a $15 billion 30-year Treasury auction. Friday we'll have some set of November Michigan Sentiment numbers. To start the week we find rates slightly higher versus Friday with the 10-year at 1.81% and agency MBS prices worse a few ticks.

State Lending Law Changes From Coast to Coast

By rchrisman@robchrisman.com

Cartoon Laws of Physics (Part 4 of 4; with some addendums tomorrow)

Cartoon Law VIII

Any violent rearrangement of feline matter is impermanent. Cartoon cats possess even more deaths than the traditional nine lives might comfortably afford. They can be decimated, spliced, splayed, accordion-pleated, spindled, or disassembled, but they cannot be destroyed. After a few moments of blinking self-pity, they re-inflate, elongate, snap back, or solidify. Corollary: A cat will assume the shape of its container.

Cartoon Law IX

Everything falls faster than an anvil.

Cartoon Law X

Any body passing through solid matter will leave a perforation conforming to its perimeter. Also, called the silhouette of passage, this phenomenon is the specialty of victims of directed-pressure explosions and of reckless cowards who are so eager to escape that they exit directly through the wall of a house, leaving a cookie-cutout-perfect hole. The threat of skunks or matrimony often catalyzes this reaction.

The National Association of Realtors reports single women have been buying single family residential homes at 2x the rate of single men over the past year. Excellent.

Are there any updates to tax information and/or documentation requirements? Yes, a handful.

 In terms of vendor services, "With increasing levels of identity theft and fraud, the IRS is constantly changing their setup requirements to remain compliant. 4506-Transcripts.com stays up to date with these changes so you don't have to. This enables us to deliver transcripts to our customers fast and without delay in service. We also offer VOEs for originating loans and quality control prior to selling. Call 4506-Transcripts.com at 925-927-3333 or visit our website at www.4506-Transcripts.com today to discover how you can utilize our expertise in these areas."

 Stearns requires that all loans where tax returns are being used in the calculation of income with an approval date later than 10/17/16 will require 2015 personal and business tax returns.
If tax transcripts are not yet available (no record found), borrower may provide stamped returns by the IRS, along with proof of taxes paid or refund received.

 Beginning with new CD requests on or after Monday, October 24th, Flagstar will offer originators the ability to request a CD once an Approved with Conditions status has been received provided certain requirements are met. A recorded training will be available soon.

 

The following Fifth Third Mortgage Company Organization Identification Numbers are required when transferring servicing and beneficial rights for a loan to FTMC through MERS:  1000538 (Fifth Third Mortgage Company) must be listed as servicer. 1000538 (Fifth Third Mortgage Company) must be listed as the investor and 1000142 (Fifth Third Bank) must be listed as the Sub-Servicer.

 Fifth Third published recent lending news which included if an AUS is rerun or any changes are made exceeding AUS resubmission tolerances, the updated AUS must be delivered to Fifth Third prior to purchase.  In addition, when AUS requires that an individual's SSN must be verified a signed SSA89 and 3rd party verification of the SSN must be in the file.

 First Community Mortgage has posted guideline updates effective November 1^st. Changes have been made to its Non-Warrantable Condos Program, Self-Employed Bank Statement Program, as well as information on Foreign Nationals, recent housing events and real estate investor loans. Click here to view the bulletin.

 NewLeaf Wholesale issued the following reminder: When adding appraisal fees to the Loan Estimate (LE) on and after November 1, 2016, please refer to the new VA Fee Sheet located on the U.S Department of Veterans Affairs website.

 Every lender has Federal laws and regulations to sort through. Layer on a series of state-level changes and it can create quite a morass. Let's see what some random states have been up to lately in terms of residential lending changes.

 Massachusetts has adopted provisions under its Truth in Lending Act. The first amendment made relates to the periodic statements which financial institutions are required to send to consumers regarding open-end credit. The changes include how late payments are treated by the financial institution and creditors. Another amendment provides that if a regulation of the federal TILA, the CFB's Regulation Z, the Official Staff Commentary, or a disclosure or model form provided by a creditor thereunder conflicts with a state provision, the Commissioner may waive, in writing, the conflicting Massachusetts provision, provided the federal provision is not substantially less consumer protective. The final amendments to the TILA add provisions for LEs and CDs. These provide that compliance with the federal requirements for the contents of these disclosures will also constitute compliance under the Massachusetts Truth in Lending Act.

 California has passed SB 777 which amends its Financial Code to add section 22050.5. Existing law exempts from regulation a person who makes five or fewer commercial loans in a 12-month period so long as those loans are incidental to the business of that person.

 California adopted AB 691 which amends the California Probate Code to authorize a decedent's personal representative or trustee to access and manage digital assets and electronic communications.The Act does not apply to a digital asset of an employer used by an employee in his or her ordinary course of business. The Act allows a user to use an online tool, will, trust, power of attorney or other record to direct a custodian of digital assets to disclose some or all the user's digital assets to a designated recipient.

 California passed SB 657 which updates the California Residential Mortgage Lenders Act to include in the definition of "Lender." The revision also now authorizes the Commissioner, at his or her discretion, to require a lender to continuously maintain a net worth greater than $250,000 but not to exceed the net worth required of an approved FHA lender in addition to maintaining the existing requirement that a licensee shall continuously maintain a minimum tangible net worth of $250,000, The provisions of SB 657 are effective January 1, 2017.

 California has also passed SB 1150 which amends the California Civil Code to provide foreclosure protection to a person claiming to be the successor in interest of a deceased borrower. SB 1150 prohibits a loan servicer from recording a notice of default in the event a person, not a party to the loan or promissory note, notifies the loan servicer that the borrower has died and claims to be a successor in interest to the borrower. SB 1150 requires that, within 10 days of a person being deemed a successor in interest the servicer shall provide, at a minimum and in writing, to the successor in interest: the loan balance, interest rate and interest reset dates and amounts, balloon payments, prepayment penalties, default or delinquency status, the monthly payment amount and the payoff amount.

 The Oregon Department of Consumer and Business Services implemented provisions concerning commercial construction lending exemption under its licensing of mortgage loan originator regulation. The Oregon law exempts lenders from the SAFE Act who make commercial construction loans from the licensing requirement under certain circumstances with proper endorsements. To qualify for the exemption, a lender would have to verify that the borrower is a licensed general contractor, that the loan is for a business purpose that will be used to construct a residential structure, and adhere to certain other provisions. 

 The Tennessee Department of Financial Institutions has announced the annual supervision fees for non-depository financial institutions for fiscal year 2016-2017, which became effective on October 14, 2016. The annual supervision fee for non-depository financial institutions in fiscal year 2016-2017, is $1,025.00 for mortgage licensees and flexible credit licensees, and $625.00 for all other licensees and registrants, except mortgage loan originators, who will continue to pay a licensing and renewal fee of $100.00 and a sponsorship fee of $100.00. The supervision fee includes the annual licensing or registration fee and the costs of a routine examination or investigation (actual expenses are still paid for out-of-state examinations and inspections).

 New York recently enacted provisions concerning the administration of digital assets. The article applies to fiduciaries acting under a will, trust or power of attorney; executors, administrators and personal representatives of decedents; guardians; trustees acting under a trust; and custodians (if the user resides in the state of New York). These parties must have been granted their powers on or after the article's effective date. This article provides user direction for disclosure of digital assets in specific situations. Part 3 of the article outlines the disclosure of content of electronic communications of a deceased user. This portion of the articles explains procedures for principals, trustees, and guardians of wards who wish to access these communications. Part 4 of the article describes the legal duties of fiduciaries. These duties mirror those imposed on a fiduciary who manages tangible property such as the duty of care, the duty of loyalty and the duty of confidentiality. Custodians must honor a request for disclosure of digital assets or terminate a user's account within 60 days of receipt.

 Pennsylvania amended certain provisions regarding powers of attorney. These changes take effect immediately. Some of the highlights to the amendment include the following. The amendment incorporates a section related to governing documents of certain entities. A power contained in the governing document for a corporation, partnership or limited liability company or other legal entity by which a director, partner or member authorizes others to do other things on behalf of the entity or a proxy or other delegation to exercise voting rights or management rights with respect to a legal entity. The amendment also briefly addresses the following topics: a spouse's power to claim an elective share, the durable power of attorney, and short form certificates for notarial acts.

 The Montana Department of Administration amended its provisions by reducing its licensing renewal fees for 2017 by 50%. This temporary rule is set to expire on March 1, 2017. In addition, the Department also adopted a new rule pertaining to the clarification of the definition of "regularly engage." The provision regarding this new rule is effective on October 15, 2016.

 After moving higher last month rates have been relatively stable since. Yesterday the U.S. Treasury market saw some backtracking after enjoying a week of slim daily gains and some steepening of the yield curve (the 2-year to 10-year stands at 100 basis points, or 1%). Agency MBS prices closed modestly changed and the 10-year T-note traded in a very small 5 basis point range and closed at 1.81%.

 But that was then, and this is now, and we've had the usual "first Friday of every month" spate of employment data, this time for October. Nonfarm Payrolls, expected at +175k, came in at +161k but with a back-month revision higher. Average Hourly Earnings, expected +.3%, were +4%. And the headline Unemployment Rate, expected at 4.9%, came in there. (We also had the September Trade Balance, which rarely moves bond markets, at $36.4 billion.) The various Federal Reserve Presidents are back on the speaking circuit, so their statements may garner some attention but the odds are certainly favoring a short-term rate increase in December. Anyway, after the employment data rates are with the 10-year at 1.82% and agency MBS prices roughly unchanged.